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Attacks on Funding for Multiemployer Pensions Sound Like the Same Old Song
- By: admin
- On: 04/15/2021 09:59:48
- In: Pension Defense
- Comments: 0
Andrew Biggs is riding his favorite hobby-horse again, accusing pension plans of chronic mismanagement. He lays blame for funding shortfalls at the feet of employers and, of course, his nemesis, the labor unions that protect workers' rights. Reality, as usual is more complicated.
Attacks on Funding for Multiemployer Pensions Sound Like the Same Old Song
Andrew Biggs is riding his favorite hobby-horse again, accusing pension plans of chronic mismanagement. He lays blame for funding shortfalls at the feet of employers and, of course, his nemesis, the labor unions that protect workers' rights. Reality, as usual is more complicated.
Biggs' real concern should be with certain unintended consequences of the Pension Protection Act of 2006. The law unfortunately forced plans to raise benefits when their overfunding levels reached 120% —but it offered no way to reverse course when funding levels dropped. This had disastrous consequences for many plans during the global financial crisis of 2008-9.
Government action and inaction have played a hand in intensifying the woes facing multiemployer pension plans—and have been a far bigger factor than any mismanagement on the part of management or Biggs' favorite bogeyman, organized labor.
With the Wall Street Journal's opinion page as his platform, Biggs delivers his latest shameless anti-pension screed by attacking the aid package included in the recently already-enacted stimulus bill to assist private-sector multiemployer pension plans. More than a million retired workers would have faced severe cuts in their pensions without funding provided under the $1.9 trillion American Rescue Act of 2021. The law authorizes $86 billion in special financial assistance that the Pension Benefit Guaranty Corporation can use to extend the solvency of financially troubled multiemployer pension plans that meet strict eligibility requirements.
Biggs tips his hand early in the article: He doesn't like multiemployer plans because they are “jointly run by labor unions and employers, often within the same or related industries.” Under this “unusual funding mechanism,” organizations with similarities function as mutual insurers. Of course, there is nothing unusual or pernicious about organizations with mutual ties banding together in this way.
But industries coming together to solve their own challenges and share risks is, apparently, a step too far for Biggs, who notes that sometimes whole industries decline. This is indisputable because of the phenomenon known as human progress—buggy whip makers are gone for good. (The same cannot be said, alas, for professional opinionators like Biggs, but that's a different article altogether.)
There is a problem, however, when government ties pension trustees' hands, as it did in the case of multiemployer plans. ERISA's “anti-cutback rule” compromises the ability of trustees of troubled plans to manage benefits proactively. Only single employer plans can take contribution holidays when plans were overfunded during periods of strong market performance. Multiemployer trustees were incentivized to increase benefits, which could not be reversed during underperforming markets.
The aid package isn't the bailout Biggs insists on calling it. It will prevent pension cuts for older retirees, but not for today's workers. Multiemployer plans have been working had to fix their shortfalls, but they can't do everything alone. As Teresa Ghilarducci noted in a critique of Biggs' article on Forbes.com, “Congress has never allowed any federal insurance program to go bankrupt. Taxpayer funds have been used to prevent the insolvency of crop insurance, flood insurance, banks, savings and loans, auto companies, and airlines.”
Ironically, Biggs has never seemed to have much problem with corporate welfare. Government tax incentives that support and subsidize private corporations have never gotten him worked up. He reserves his wrath for any hint that ordinary, hard-working Americans might be advantaged by government action. And the fear that favorable government policy might extend to public pension plans gets him in a complete lather. He couldn't possibly let that happen.
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You may also be interested in: NCPERS Responds to “Can States Afford Rising Public Pension Debt”; NCPERS Response to “COVID-19 will turn the state pension problem into a fiscal crisis”; NCPERS Responds to “Two Decades Ago, Progressives Warned of a Retirement Crisis. It Didn't Happen.
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